online gaming rules: game firms seek clarity on revised rules

Game companies that fear legal action or investigations by state governments acting under local law despite being notified of a revised set of central rules on Thursday are seeking further clarification from the union government, several executives told ET.

They are especially concerned gambling, betting and betting on the outcome of the game are state entities in accordance with the Constitution and may be broadly defined. They also added that states can ban gambling in their area in accordance with local laws.

At a meeting with Rajeev Chandrasekhar, the Minister of State for Electronics and Information Technology, on Friday, high-ranking representatives of gaming companies asked for clarification in the form of frequently asked questions (FAQ), the sources said. The minister urged the industry to submit proposals for the creation of self-regulatory organizations or SROs to oversee gambling in the country, they added.

Read also | Notice of new rules of the game; industry praises but conditions apply

“Now we have recommendations for online games. However, in all likelihood, different states may still interpret gambling and betting according to their own definitions of this activity,” said Rajan Navani, CEO of gaming company JetSynthesys. They could mean “risking something of value for the chance of winning a bigger prize (in the form of gambling or betting) and enacting legislation,” he added.

“Gambling, sweepstakes – subjects of the state”

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Representatives of online games and technology companies, including Dream11, Nazara TechnologiesInMobi, Gamecraft, Winzo gamesMobile Premier League (MPL) took part in a 45-minute meeting with Mos Chandrasekhar. Also in attendance were members of industry organizations such as the Federation of Indian Fantasy Sports (FIFS), the Electronic Games Federation and the All India Gaming Federation. “The rules speak for themselves. We have heard their concerns and will provide any clarification if necessary,” a senior government official who attended the meeting told ET.

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The new rules allow the industry to determine its own parameters for which online games will be allowed to operate in India. It states that SROs, made up of industry representatives and experts, will have the power to decide what games can be offered to users, while warning that they will not allow betting or betting of any kind, and allow games that are harmful consumers.

Read also | Government notifies rules for online gaming to appoint multiple SROs

The gaming industry and legal experts believe the union government should have made the rules more explicit instead. Thursday’s notice laid out a framework that legalizes real-money online gaming but only bans those that allow betting or gambling. The key issue, executives said, was how state governments would align with this new set of rules.

“Gambling and sweepstakes are state entities in accordance with the Constitution. It will be interesting to see if any state deviates from its territorial jurisdiction,” said Abhishek A. Rastogi of law firm Rastogi Chambers.

“These are early days and the uncertainty in this space will certainly be muddled over a period of time with pragmatic adjustments,” he added.

The new structure creates a distinction between online games and wagering games, which is welcomed by the industry. But the decision to leave the definition of “outcome betting” open could potentially lead to controversy, they added.

On top of that, according to the people mentioned above, companies have also sought to clarify the Know Your Customer (KYC) requirement under the new rules. The Center has ruled that all online real money gaming intermediaries must conduct electronic KYC of users on behalf of the central bank for any monetary transactions.

“We have been assured that the e-KYC process provided by the RBI will only start when the user starts making transactions with real money. The process will not apply to all users of online games that use or involve real money,” the source said.

In addition, they requested clarification on the structure and functioning of the SRO.

“One of the participants raised the issue of buying forums by online gaming companies in the presence of several SROs,” said one of the participants in the meeting. He wanted to clarify “whether it was the intention of the government to allow multiple SROs to have different formats, such as card games, fantasy sports, casual games, etc., to have their own self-regulatory bodies,” he added.

Meanwhile, IT ministry officials believe the rules of the game are very clear on what is allowed and what is not.

“The only thing that is not allowed is real money games in which a person bets on a third-party outcome. We were asked to speak to the states and explain our position. They (ITM officials) told us that they would intervene if there were gaps and if states demanded further clarification and guarantees on this matter,” said one person with direct knowledge of the discussions.

However, another ministry official told ET that some fantasy games may face difficulties in the future, despite their statement that they do not allow betting or wagering.

“We will take small steps in these aspects. Although we are not dealing with the operational parameters of the functioning of the game, there is an element of stakes here. We will wait for the decision of the SRO on these issues,” the official said.

The government intends to start with three SROs and may expand depending on workload and industry demand. These SROs will have to follow the general operating guidelines issued by the Ministry of Information Technology and, if they fail to do so, will be de-registered as a self-regulatory body.

“The minister told companies to come up with proposals on how SROs should behave, but also stressed that DNA S.R.O. should be such that it is not dominated by the industry,” said a participant in the Friday consultation.

“He (the minister) told us that a reliable institution should appear in the industry in the next three months, otherwise the government will initiate the process of creating an SRO,” another source added.